Can a Company Liquidation Be Reversed?

March 31, 2023 / Business Insolvency

For many directors, liquidation will be a fitting end for their company. This could be for any number of reasons, from major debt issues to pursuing other ventures, or even just for retirement. However, some directors may have been hasty in their decision, and are now wondering if they can reverse their company liquidation.

In this article, Clarke Bell will discuss company liquidations, detailing whether the procedure can be reversed, what options directors have to do so, and why you might wish to reverse your decision.

Why reverse a company liquidation?

Before we discuss how to reverse a company liquidation, let’s first consider why you might want to reverse the liquidation. Although liquidations provide an effective means of closing a company, some strong reasons exist for reversing the procedure. Naturally, the first and foremost reason is that directors decide they want their company to continue running. Equally, shareholders could prefer to keep the company running, and ask the directors to reverse the liquidation. This could be because they have identified a strategy to improve the company’s profitability, or due to a change of heart.

Can a company liquidation be reversed?

The answer to this question depends heavily on the type of liquidation, and the circumstances surrounding the liquidation. There are three methods of company liquidation, two being voluntary and one involuntary, with each method having its quirks regarding reversal. Let’s consider each method in detail.

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Reversing a Members’ Voluntary Liquidation

A Members’ Voluntary Liquidation (MVL) is a voluntary method of liquidating a solvent company. While it offers a tax-efficient method of closing down a company, some directors may reverse their decision, for reasons we have discussed. Under this method of liquidation, reversal is possible, provided certain criteria are met.

Reversing an MVL can only be done within six years of the liquidation being approved. To begin the reversal process, you must first submit an application to the high courts and provide evidence that reversing the decision would benefit the company. Essentially, you will need to detail that it makes financial sense to reverse the decision, showing the courts that you aren’t being frivolous with your decision to reverse liquidation.

Although it is possible to reverse an MVL, provided your company has a solid business plan behind it, doing so isn’t easy. Reversing an MVL is a lengthy process, one that can cost a significant amount of time and stress. The best outcome is either liquidating when you need it and sticking by your decision, or not taking the plunge in the first place. As such, obtaining professional consultation is highly recommended, as it can save you from making a hasty decision.

Reversing a Creditors’ Voluntary Liquidation

A Creditors’ Voluntary Liquidation (CVL) is the often most effective method of closing an insolvent company. It affords directors freedoms and legal protections not provided by compulsory liquidation, resulting in favourable outcomes for directors and creditors alike. However, it isn’t always the right decision, and some directors might wish to reverse it. This is typically because directors find that they can repay their company’s debt, by means of hefty investment, sheer luck, or otherwise.

Reversing a CVL requires the meeting of two criteria; the acquisition of a court order, and the company has not yet been struck off from the Companies House register. If a court order is obtained, any remaining assets will not be disposed of, and the procedure will not reach its conclusion. However, directors will have to take a different approach if the company has already been struck off.

If the company no longer exists, an application for the reversal of a CVL can be made within six years of the liquidation. This will require the submission of an RT01 Form at the Companies House. If accepted, the lengthy process of reinstating the company can begin. As with an MVL, it is far better to either stand by your decision or not choose to liquidate at all, making professional advice invaluable.

Reversing a compulsory liquidation

Reversing a compulsory liquidation is by far the most difficult of the three. While possible, action must be taken in a very short timeframe, and you must make a compelling case to the courts. Assuming the Winding-Up Petition that preceded the compulsory liquidation was not opposed, you will have five days to contest the following court order.

Objecting to the court order demanding the compulsory liquidation of your company is a difficult task. You could make several arguments, including stating that you couldn’t make the initial court hearing for a valid reason, or that your company can repay its outstanding creditors. Alternatively, you could contest the validity of the court order, arguing that certain details are inaccurate, or that the order is not legitimate at all. For any of these arguments to bear fruit, you must be able to make a strong case to the courts, which will require reliable evidence. You will also be required to submit a Form IAA, which will be handed to the court you are dealing with. In turn, they will send you a notice detailing your court appearance, giving you a chance to argue your case.

Clarke Bell can help you

If you are struggling with your company’s finances, don’t risk making a hasty decision; let Clarke Bell help. We have more than 28 years of experience in helping companies find the best solutions to their financial problems, and we can do the same for you. Don’t hesitate to contact us today for a free, no-obligation consultation and find out exactly what we can do for you.